Thanks for that GB.
Indeed. That’s the only way I’d buy Irish bank shares. Problem is, by the time you hear about possible take-overs, it’ll be too late as the cream will be skimmed off by the ISEQ insiders.
So are we looking at a scenario where all Irish banks are really Northern Rocks? Or is there an interim possibility?
Somebody gets it!
There are so many good things in this long article. It’s really worth reading the whole thing. For the Pollyannas, this sets out the doom and gloom argument clearly and factually.
Much as I’ve always poo-pooed the idea of leaving the euro, a systemic banking crisis might force it. I remember someone was looking into opening foreign bank accounts. Can anyone find the link?
Much like I’ve claimed for many years while travelling in Asia, I really am from Iceland.
All banks the world over that lend on a reserve ratio greater that 1:1 are potential northern rocks. Once confidence is lost in any one bank in this country they all go down in rapid succession. Ulster bank have admitted they can somehow cope until 2010, which is a very eerie parallel with Japan’s banking system, because it took 4 years from the top of the cycle before the banks started to collapse.
I must quote this bit from Richard Douthwaitein Construct Ireland.
Very very well explained . I could easily quote more. That article is excellent and should be required reading in secondary schools .
So if we stress Irish property at 2008 incomes * 2.5 we see that there should be a large rump of lower mid market property available outside Dublin at about €100k and in Dublin at €120k .
Yet there is no lower mid market property in Dublin for under €300k right now and even the low end of the market in peripheral areas in Dublin has only recently crept under the €200k mark .
This is by way of explaining where we are heading as normality reasserts istelf.
There are a couple of factors that will take it to that level and lower!
It’s the empties stoopid!
Banks risk averse with impaired loan books
Higher cost of living (food, energy & taxation)
unemployment & emigration
The ghost estates in the more remote areas of the country are worth scrap value and will depreciate rapidly because there will be no maintenance carried out on them, they will be vandalised (some already are) and there is insufficient employment in these areas to support buying, the idea that landlords will be able to depend on the councils to pay for tenants may work for some in the short term, but even these tenants will get sick of the isolation and lack of services and desert the place by burning it down if they have to (refer to Moyross & Southhill estates during the 80’s to see what happens)
When there are no takers of these properties within two years they should be knocked and the materials recycled for some other use.
The apartment market will also crash hard, due to a combination of factors:
- Oversupply - many not even completed yet. (see Dublin docks)
- Bad design - too small for long term living to raise a family and noise pollution/lack of privacy is a common complaint.
- Too many mis-management companies who do not provide adequate service.
- Council policy - Social welfare tenants move in, other tenants move out.
- Negative equity Owners - many bought with a five year horizon, with the intention of being able to trade up, the 3 bed semi still retains its place as the starter home for many.
The 3/4 bed semi in urban areas will likely find a bottom in price before any of the others do.
Very alarming table here:
Thats pretty much exactly what I see, when I see it and where I see it .
I only snipped for readability
The banks will no doubt see this too …by next year some time… and will therefore render the financing of apartments and of ghost estates impossible .
Because there will still be a market for them? Whereas apartments will sell almost at random with no discernable market?
Is there a point at which Irish banks might look attractive to larger overseas banks or private equity houses. If
- bad loans are written down and impairment charges taken. At some point this will have completed.
- organisation rationalised, staff numbers cut, dead weight cut loose, e.g. Bristol & West for BoI
- possibility of number of players in the market shrinking due to banks going bust, less competition, more profit
Right now I can see why nobody would touch an Irish bank and obviously trying to finance a deal at the moment would prove difficult except for a soverign wealth fund but at some stage they will become attractive again, maybe 5 years time.
There is a defined market for the 3/4 bed semi - couples wanting to have children, who require space and privacy, which in a normal market comprises the majority of buyers so you can put a bottom on this market by basing around average industrial wage and bank lending criteria
The problem with the apartment market in Ireland, is that it has been designed with the DINKYand specuvestor in mind. Now that the immigrants of the last decade are leaving , who is going to rent these places? Now that there is no capital appreciation why would the DINKY be interested? Throw in the management company and legal title issues for good measure and you are left with a conundrum, how do you price these yolks in order to find a bottom in the market?
That’s a problem for the next generation to tackle. Nobody currently in power cares one iota. Despite this, they’re still unwilling to hand over the reigns and cling on to their little empires at all costs.